Who Qualifies As Insurable Dependents?

A dependent is a person who relies on someone else for financial support and can be claimed for tax credits and deductions. This includes children or other relatives who are unable to take care of themselves. In the context of health insurance, a dependent is a person who is eligible to be added to a policyholder's coverage. This can include a spouse, domestic partner, biological child, adopted child, stepchild, grandchild, adult child with a disability, foster child, or someone for whom the policyholder is the legal guardian. It's important to note that the specific rules and regulations regarding dependents may vary based on location and the specific insurance provider.

Biological, adopted, and stepchildren

Biological children can be covered as dependents on their parent's insurance plan. In most states, parents cannot be added as dependents on their child's insurance plan, although California does allow this. In general, children can be covered by their parents' insurance plans up to the age of 26. If the child is disabled, they may be covered beyond the age of 26.

Adopted children can also be covered as dependents. In the United States, adoption laws vary by state, and adoption alone does not confer any immigration status to the child. However, adopted children may be eligible to acquire U.S. citizenship through their adoptive parent(s). To immigrate to the U.S., a stepparent is not required to adopt their stepchild, but they may need to file specific forms, such as Form I-130, Petition for Alien Relative.

Stepchildren may also be considered insurable dependents. A stepchild is a child born to or legally adopted by your spouse before your marriage to them, whom you have not legally adopted yourself. If you do legally adopt your stepchild, your parent-child relationship is legally the same as if the child were biologically related to you. According to the IRS, for a stepchild to be claimed as a dependent on tax returns, they must live with you for more than six months of the calendar year and be younger than you (unless the child has a permanent disability).

Adult children with disabilities

In the United States, adult children with disabilities can be considered insurable dependents and may qualify for various benefits. These benefits are often based on the parents' earnings, retirement, or disability status, and the child's disability must meet certain criteria. Here are some key points regarding this topic:

Social Security Benefits:

• The adult child must be 18 or older with a disability that began before the age of 22.
• The adult child should never have earned more than what is considered Substantial Gainful Activity (SGA).
• The disability must be approved according to Social Security Administration (SSA) medical criteria.
• The deceased parent must have worked long enough and paid Social Security taxes.
• The adult child's disability benefit will be a percentage of the parent's benefit amount, which is based on their Social Security contributions.

Medicare:

Medicare is a federal health insurance program for individuals 65 and older or those with disabilities. Adult children with disabilities may qualify for Medicare under the following circumstances:

• Disabled Adult Child (DAC): This applies to adult children over 18 who have a qualifying disability that began before the age of 22. They can receive Social Security Disability Insurance (SSDI) benefits based on a parent's Social Security earnings record. The disability must meet Social Security's definition of total disability for adults.
• End-Stage Renal Disease (ESRD): Children of any age with ESRD, which means their kidneys no longer work and require regular dialysis or a transplant, may qualify for Medicare.
• Amyotrophic Lateral Sclerosis (ALS): Adult children with ALS, also known as Lou Gehrig's disease, can qualify for Medicare immediately, but they must be 18 or older.

Supplemental Security Income (SSI):

SSI provides benefits to adults and children with disabilities who have limited income and resources. SSI payments are made until the child turns 18, after which the disabled child becomes eligible for SSDI benefits as a disabled adult child.

Medicaid:

Medicaid is a joint federal and state program that provides financial assistance for healthcare to individuals with low income and resources. Adult children with disabilities may qualify for Medicaid depending on their income, resources, and the specific requirements of their state.

Children's Health Insurance Program (CHIP):

CHIP provides health coverage for children in families who earn too much to qualify for Medicaid but cannot afford private insurance. Each state has its own eligibility criteria for this program.

State-Specific Laws:

Some states, like Texas, have specific laws regarding child support for adult children with disabilities. In Texas, indefinite child support can be paid for an adult child over 18 who requires substantial care and personal supervision due to a mental or physical disability, and this disability must have existed or been known to exist before the child turned 18.

Foster children

To qualify as a dependent, a foster child must meet these basic IRS guidelines:

• The child is under the age of 19 (or 24 if they're a full-time student) by the end of the year.
• The child is younger than you and your spouse, if married and filing jointly.
• The child has lived with you for more than half the year.
• The child receives more than half of their support for the year from you (and not the government or the agency that placed them).
• The child did not file a joint tax return for the year.
• The child is not claimed as a dependent on anyone else's tax return.

It is important to note that claiming a foster child as your dependent does not get you an additional deduction on your taxes; these personal exemptions were eliminated in 2017. However, if you're single, having a dependent may enable you to file as head of household, which offers a higher standard deduction and may help qualify you for a range of tax benefits.

Additionally, foster parents may be able to deduct unreimbursed foster care expenses as charitable donations if the agency that placed the child with them is a qualified charity. Any foster care payments received from a government agency or child placement agency are considered non-taxable income.

Grandchildren

To claim a grandchild as a dependent, they must meet the following criteria:

• Relationship Test: The grandchild must be your descendant, including step-grandchildren and adopted grandchildren.
• Residency Test: The grandchild must have lived with you for more than half of the tax year.
• Age Test: The grandchild must be under 19 years old at the end of the tax year, or a full-time student under 24. There is no age limit if the grandchild is permanently disabled.
• Support Test: You must provide more than 50% of the grandchild's total support for the year.
• Joint Return Test: The grandchild cannot file a joint return for the year.
• Citizenship Test: The grandchild must be a US citizen, US national, US resident alien, or a resident of Canada or Mexico.

If a grandchild meets these criteria, claiming them as a dependent can provide tax advantages, such as lower taxable income, a higher standard deduction, and eligibility for various tax credits like the Child Tax Credit and Earned Income Tax Credit.

It is important to note that there are some potential drawbacks to consider when claiming grandchildren as dependents, including increased audit risk, changes in eligibility for other deductions, and impact on financial aid for college-bound grandchildren. Additionally, if the grandchild's parents object, they have the first right to claim the grandchild as their dependent.

Legal guardianship

A legal guardian is an adult chosen by a court or a dependent's will to make decisions on behalf of an individual who cannot make decisions for themselves, usually a minor but sometimes an adult with special needs. A guardian is often appointed to look after a minor, the property of a minor, or both. Parents may also establish guardianship over their child's estate, particularly when a minor comes into a large amount of money.

Guardianship is assigned by a court, such as a family court, according to state laws. It requires a court order. A child who lives with the employee or whom the employee supports financially is not in a legal guardianship relationship without such a court order.

In the context of health insurance, a dependent refers to anyone who is eligible to be added to a health insurance plan, granting them access to the same or similar benefits as the policyholder. In most cases, health plans consider spouses and children as dependents, but parents are not usually eligible for dependent coverage. However, if you have legal guardianship of your parents due to incapacitation or other reasons, some providers may allow you to add them to your health insurance policy as dependents.

Children who are considered eligible dependents under legal guardianship include all unmarried children who are your dependents under a court-ordered legal guardianship and who are claimed as your dependents on your most recently filed federal income tax return or will qualify in the current year for dependency tax status.

Frequently asked questions